Home insurance is among the most frequently purchased types of coverage across the United States. However, while these policies are a common loss control measure, they can also be complicated and confusing. Given the importance of appropriate home insurance, which may even be required by many mortgage lenders and homeowners associations, understanding your coverage options and retaining an adequate policy should be among your top priorities. 

Types of Home Insurance Policies 

The first step to acquiring appropriate home insurance is understanding the various coverage options available to you. Types of homeowners (HO) policies commonly available may include the following: 

• HO-1 policies are the most basic type of home insurance and provide coverage for the structural elements of your home, including its roof, foundations and attached fixtures.

• HO-2 policies expand on HO-1 coverage by including additional perils and generally helping pay for losses involving detached structures on your property, such as garages and sheds, as well as personal belongings, including electronics and furniture.

• HO-3 policies are the most common type of home insurance and include coverage for structures, personal belongings and losses related to personal liability and temporary living expenses (e.g., hotel accommodations) if your home becomes temporarily uninhabitable due to a covered peril.

• HO-5 policies function similarly to HO-3 policies but often include higher coverage limits for valuable possessions, such as jewelry and fine art.

• HO-6 policies are intended for condo owners and generally provide coverage for your belongings, personal liability, temporary living expenses and any losses involving improvements you’ve made to the interior of the residence.

• HO-8 policies also include similar coverage options as HO-3 home insurance but may be tailored explicitly toward homes that are older, have historic or architectural significance or include structural elements that would make repairs particularly expensive.

Factors to Consider When Purchasing Home Insurance 

When weighing your home insurance options, consider the following: 

• Coverage—Ensure your policy’s limits can cover a total loss of your home and that all relevant perils are included. Hurricanes, earthquakes and floods may be excluded from standard coverage, making endorsements necessary.

• Deductibles—Having a higher deductible may help lower your premiums but it also means that you may need to pay more out of pocket following a covered incident.

• Type of reimbursement—Determine if your home insurance will include replacement cost coverage or actual cash value coverage. While the former may cost more, the latter accounts for depreciation on your home and possessions, meaning that it may not provide enough financial assistance to fully repair or replace your losses.

• Discounts—You may be able to lower your premiums by bundling your coverage under the same insurance company as other policies, such as auto insurance. Updating your home and installing various safety measures, such as smart devices and security systems, may also garner savings.